The Canadian Imperial Bank of Commerce has announced:
its intention to redeem all of its issued and outstanding Non-cumulative Class A Preferred Shares, Series 19 and all of its issued and outstanding Non-cumulative Class A Preferred Shares Series 23, for cash. The redemptions will occur on October 31, 2010. The redemption price is $25.45 per Series 19 share and $25.00 per Series 23 share.
The final quarterly dividend of $0.309375 per Series 19 share and $0.331250 dividend per Series 23 share for the period from August 1, 2010 to October 31, 2010 will be paid in the usual manner on October 28, 2010 to holders of record on September 28, 2010.
Beneficial holders who are not directly the registered holder of these shares should contact the financial institution, broker or other intermediary through which they hold their shares to confirm how they will receive their redemption proceeds. Formal notices and instructions for the redemption of Series 19 shares and Series 23 shares will be forwarded to registered shareholders.
Series 19 is CM.PR.R, which was listed 1998-03-26 and closed at 26.05-24 on September 27, is an OperatingRetractible with the option schedule:
Retraction 2013-04-30 INFINITE DATE 26.040000
Redemption 2008-04-30 2009-04-29 25.750000
Redemption 2009-04-30 2010-04-29 25.600000
Redemption 2010-04-30 2011-04-29 25.450000
Redemption 2011-04-30 2012-04-29 25.300000
Redemption 2012-04-30 2013-04-29 25.150000
Redemption 2013-04-30 2999-12-29 25.000000
The YTW Scenario as of last night’s close was for an immediate call at 25.45 to yield -27.01% … and that’s what happened. Investors were presumably counting on it to last until its softMaturity 2013-4-29 to yield 3.29%. This issue was relegated to the Scraps index on volume concerns.
Series 23 is CM.PR.A, which was listed 2001-02-06 and closed at 25.10-29 on September 27, is an OperatingRetractible with the option schedule:
Redemption 2007-10-31 2008-10-30 25.750000
Redemption 2008-10-31 2009-10-30 25.500000
Redemption 2009-10-31 2010-10-30 25.250000
Redemption 2010-10-31 INFINITE DATE 25.000000
Retraction 2011-07-31 INFINITE DATE 26.040000
The YTW scenario as of the close last night was for a call 2010-11-30 at 25.25 to yield 0.20% … pretty close! Investors were presumably counting on it to last until its softMaturity 2011-7-30 to yield 4.25%.
DBRS comments that it:
has reviewed the announcement by Canadian Imperial Bank of Commerce (CIBC or the Bank) to redeem all of the outstanding Non-Cumulative Class A Preferred Shares, Series 19 and Series 23. The redemption has no rating implications for CIBC at this time.
DBRS believes this transaction will reduce the Bank’s Tier 1 capital ratio by approximately 50 basis points (bps), which still leaves the ratio at the top end of its Canadian peer group range. At the end of Q3 2010, CIBC’s Tier 1 capital ratio was 14.2%. No impact is expected on the tangible common equity to risk-weighted assets ratio, which was 9.0% at the end of Q3 2010, as DBRS already excludes preferred shares from this calculation.
Given changes in Basel capital requirements and international accounting standards, the redemption of these two series of preferred shares is not unexpected.
After these redemptions, there will be only eight members left in the OperatingRetractible index. It will be interesting to see what happens to TD.PR.M and TD.PR.N tomorrow!